Volatile:tending to vary often or widely; inconstant; fickle; ephemeral; fleeting;
tending to violence.The term seems
perfectly descriptive of today's stock market.It has made my work a little more, um, interesting.

The human trait is
to celebrate when prices soar, and when that happens there is rarely much talk
of volatility.It is when prices move sharply lower that volatility, with
it's negative connotation,becomes
the buzzword.Higher prices good,
lower prices bad.Seems pretty
natural to me.

It is further the
human condition to try to find a guilty party when we are perceived to have been
damaged.After all, no one ever looked to find a culprit during the
period when housing prices were soaring beyond rationality, or when we had
bubbles in stocks.No one
questioned Madoff as long as the numbers he invented seemed rosy.Only when these assets come crashing down to reality do we try to find
someone or something to blame.The
fault, dear Brutus, lies not in the stars....We are all guilty of greed.

What has spooked
people of late has been the degree with which the markets can move in a single
session.Daily moves of 100 or 200 points on the Dow are commonplace,
and moves of double and even triple that amount seem to be happening more
frequently than ever.The moves are
in both directions, up and down, and often a sharply down day is followed by an
equally sharp up day.What drives
these moves?It seems to make no
sense.

But is that degree
of movement unprecedented?Yes and
no:compare the 1970's with today,
and you will see that 40 years ago we had many more swings of 2% or more than we do
today.(As I write this, a 2% move
is equal to 225 Dow points.)If you
count days with moves of 4% or more, though, the current period is unique.

On closer
inspection you will see that the current level of volatility has occurred
primarily during the summer of 2011.Does
this tell us anything about the market going forward?If it does, I am at a loss to discern what it might be.In previous times of extreme volatility the fire seemed to burn down and
trading returned to more subdued levels, leaving no permanent damage.I expect that this is what will happen again.

The correlation
with the 1970's seems apt.During
that era (say, 1968 to 1982) stocks behaved very much as they have behaved over
the last dozen years; a series of rolling tops, followed by often-violent
corrections, then a gradual recovery, but never seeming to definitively surpass
the old highs.And yet, history
shows us that the proper course of action was to buy on the extreme dips and to
hold our positions through the storm.The
big dips can indeed offer us attractive buying opportunities, for which we must
be alert.And brave.

The bond market,
meanwhile, seems to be immune to the disease affecting stocks.It has continued its gradual, steady upward trend, (meaning that interest
rates continue going down).Please
be aware that this condition cannot persist.There is a top to the bond market; it is at zero percent, and we are very
close to that now.

There is a lot of
negative news roiling the markets today.In
my opinion a lot of it is just noise.Will
Greece default?Will housing ever
bounce back?Will the jobless
numbers improve?Will our debt
situation ever improve?All of this
is fodder for journalists, pundits and politicians.We are a robust, diversified nation, and we will overcome all of these
problems, and all of the myriad problems that I do not have room to mention.I cannot tell you how these things will be resolved, or, more
importantly, when, but I do have faith that they ultimately will become only
memories, historical talking points.In
the interim, when we get large moves to the downside in stocks, we will look to
use it as a buying opportunity. Given lemons, we will try to make
lemonade.